Ireland-based advertising titan WPP Group plc. (WPPGY) on March 4 reported its preliminary results for the fourth quarter and the fiscal year 2010. Diluted pro forma earnings per share in the reported period were £0.567 ($4.39 per ADR), up 27.7% (22.5% in constant currency) from £0.444 ($3.44 per ADR) in the year-ago period.
Revenue
The company reported revenue of £9,331.0 million ($14,463.1 million) for the fiscal year 2010, an increase of 7.4% year over year and 5.6% on a constant currency basis.
From a geographical perspective, WPP Group experienced growth in all regions except for slight fall in the Western Continental Europe. Revenue from North America was £3,299.8 million ($5,114.7 million), up 9.6% year over year.
Revenue in the United Kingdom grew 5.7% to £1,087.6 million ($1,685.8 million), while revenue from the Western Continental Europe declined 0.1% to £2,325.3 million ($3,604.2 million) and from the Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe soared 13.0% to £2,618.3 million ($4,058.4 million).
Revenue from public relations and public affairs grew 6.1% year over year to £844.5 million ($1,309.0 million). Branding & identity, healthcare and specialist communications witnessed a revenue increase of 7.0% to £2,323.0 million ($3,600.7 million), while revenue from advertising and media investment management increased 9.1% to £3,733.3 million ($5,786.6 million) and revenue of £2,430.2 million ($3,766.8 million) from consumer insight soared 5.8%.
Billings in the period amounted to £42,683.6 million ($66,160 million), up 12.6% (10.4% on a constant currency basis) compared with a year-ago period. Net new business billings of £3.0 billion ($4.65 billion) were won during the fiscal year 2010.
Direct cost, as a percentage of revenue, increased 20 basis points to 8.3%, which led to a decline in gross margin from 91.9% in 2009 to 91.7% in the fiscal year 2010. Operating costs declined to 81.3% from 83.1% of revenue in the fiscal year 2009.
EBITDA increased 15.8% to £1,439.0 million ($2,230.5 million) and margin was 15.4%. Operating profit increased 20.8% to £1,228.7 million ($1,904.5 million) with a margin of 13.2% versus 14.3% in the fiscal year 2009.
Balance Sheet
Exiting the fiscal year 2010, WPP Group had cash and short-term deposits of £1,965.2 million ($3,045.1 million), up 17.9% year over year. Bonds and bank loans were £3,598.2 million ($5,577.2 million) versus £3,586.4 million ($5,774.1 million) in the previous year.
Net cash flow from operating activities in the fiscal year 2010 was £1,361.2 million ($2,109.9 million) compared with £818.8 million ($1,285.8 million) in the fiscal year 2009. Capital spending plummeted 14.5% year over year to £190.5 million ($295.3 million).
The company’s board of directors declared its second interim dividend of £0.1182; payable on July 4 2011, to shareholders of record as of June 3, 2011. The second dividend combined with first interim dividend of £0.0597 per share brings the full year dividend to £0.1779 per share.
Outlook: Management anticipates organic growth in the fiscal year 2011 to be around 5% and targets margins to improve at least 0.5 margin points in 2011 and 2012. Over the long term, WPP Group targets to achieve operating margin of 18.3% and EPS growth of 10%-15% through an organic revenue growth of 5%.
We currently maintain an Outperform recommendation on the company.
WPP GRP PLC (WPPGY): Free Stock Analysis Report
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